Part I - Origins, Ulbrichts and the rise of the Silk Road

CultureFebruary 19, 2019By Will Brendza

This is the first of a multi-part series on the creation and takedown of the cryptocurrency dark-web marketplace known as the Silk Road, the hunt for the Dread Pirate Roberts and the arrest and trial of Ross Ulbricht. Where this article ends, next Tuesday’s will pick up.

Take heed, though, dear reader: this is not a story for the faint of heart. The story that is about to unfold lies at the intersection of America’s drug war, financial regulation and cyber capitalism, an international story full of pirate leaders, cloak and dagger computer hacking, rogue government agents, crypto-fortunes, treachery and injustice. What conspired between 2011 and 2013 changed the internet forever and gave birth to a new, truly free form of capitalism.

And it all began with an honest idea.

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In the moments before government agents swarmed and arrested Ross Ulbricht for allegedly masterminding and managing the Silk Road anonymous marketplace, he was at a public library in San Francisco downloading an episode of the Colbert Report.

That would be his last act as a free man.

A site administrator had contacted Ulbricht that morning via a Silk Road chat box, requesting help with one of the sites flagging functions. Unbeknownst to Ulbricht, this was an elaborate setup, the climax of an investigation that had been going on for the better part of two years. The “admin” on the other end of that chat was a government investigator, named Jared Der-Yeghiayan, and all around Ulbricht, throughout the library in plainclothes were FBI agents, pretending to do library things, watching, waiting for their signal to pounce.

And as soon as he logged onto the infamous, long-sought-after admin account known as the “Dread Pirate Roberts” (DPR) they made their move.

Within moments Ulbricht was in handcuffs, his computer was in custody, the contents being copied by an agent and he was embarking on a new phase of his life — life behind bars. And according to him, his lawyers and his mother, Ulbricht is doing time for a crime that wasn’t entirely his.

“The judge actually came out and said that that they were going to make an example out of him,” Ross’ mother, Lyn Ulbricht says of her son’s double-life-without-parole sentence. “They said that since he was the first person to use the Internet in this way he was going to have to take the brunt for everybody who came after.”

I remember the Silk Road in near-mystical terms. I never had the chance to buy anything off of it, but rumors of this strange, futuristic dark web marketplace started circulating among psychedelic circles not long after I moved to Boulder and fell into them.

“The Silk Road, man. Have you heard of it?” some wook would invariably ask, as a joint moved around the circle.

“Of course I’ve heard of it. They say you can get anything off there: coke, acid, Cuban cigars, fireworks…”

“Buddy of mine bought a Cayman alligator.”

Pause.

“I can buy an alligator off a fucking website?”

“And you can order some weed while you’re at it.”

Conversations like this were commonplace. You could expect to hear something like that anyplace drugs were: in hotel rooms after electronic shows, in cars being hot-boxed, or around kegs at house parties. Shadow places. Sub-culture conversations.

Slowly, though, I started to hear those conversations in broad daylight, in restaurants and coffee shops and eventually even on the news when Senator Chuck Schumer called for a crackdown on Bitcoin and the immediate closure of Silk Road. Eventually I would see Ross Ulbricht’s face on those television shows, some stranger who I assumed was a master-coder, a brilliant counter-culture criminal bent on making sure anyone anywhere could buy whatever illicit goods they wanted, any time they wanted to.

However, that was not the picture I got from Lyn Ulbricht when we spoke on the phone. She’s been fighting for Ross’ freedom since the day he was sentenced to life behind bars, gathering signatures on a petition for Ross’ clemency at FreeRoss.org. Lyn has followed him around the country, from one maximum-security prison in New York, to another one here in Colorado. And now she’s moving again. Ross is currently in transit, Lyn tells me, and she has no idea where to.

“I'll be there every week that I can, so he has consistent visits.” Lyn says. Those visits have been his rock in a river of uncertainty and insanity, she tells me. “He is a great person. He didn't mean any harm with Silk Road.”

Now, the cynics out there are probably thinking, “Sure, dude. My mom would say that too, if I’d been labeled a criminal mastermind and handed a double-life-without-parole sentence.”

That’s a fair point. And, in all honesty, I was skeptical, too.

But, the deeper you dig into Ross’ story, the easier it is to believe Lyn Ulbricht. Ross is a very intelligent, very idealistic and driven individual — very unlike the dangerous villain he was painted as by the media and the prosecution. He was an Eagle Scout and an avid camper, he loves the outdoors and he had no criminal record prior to the Silk Road. According to Lyn, Ross lived very frugally. He didn’t own a car and shared an apartment with three roommates in California at the time of his arrest.

“At one point he was talking to me about going to Hawaii and living in the jungle with only a knife,” Lyn says, chuckling at the memory. “He lived very simply.”

Ross earned his bachelor’s degree in physics and a masters in Materials Science from Penn State and even helped develop advances in solar energy at UT Dallas Tech Institute. He owned a business called Good Wagon Books from which he donated 10-percent of his annual earnings to charity. He worked on Ron Paul’s campaign at Penn State, believed deeply in libertarian ideals and was fascinated by Austrian economics (an economic theory that stresses consumer freedom, and limits government involvement as much as possible).

What Ross is not, Lyn Assures me, is some kind of genius hacker or a criminal mastermind. He just wanted to create a free and private marketplace.

By his own words in court, “Silk Road was supposed to be about giving people the freedom to make their own choices, to pursue their own happiness however they individually saw fit.”

So what happened? If he’s not the super-hacker kingpin that he was made out to be, how did he get stuck with the most severe sentence a judge can hand to a non-violent offender? How did he get nailed for the first ever large-scale dark web marketplace bust in human history?

“He was very enthusiastic about bitcoin,” Lyn tells me. “And, he was very concerned about privacy. Which of course has become more and more of an issue since he was arrested.”

Ross had been toying with the idea of a free marketplace for a long time. And when Bitcoin rolled onto the scene, Ross was faced with the perfect currency for his visionary experiment in capitalism. He saw an opportunity to realize something profound and he took it.

He turned to an old college friend, who had experience computer programming (because, as mentioned, Ross has very limited knowledge in this subject), a man by the name of Richard Bates. Bates had experience working for Paypal and eBay and Ross consulted him to mull over the logistics of creating something like the Silk Road. Bates offered Ross some help, but in the end, he was hesitant to get too involved for fear that law enforcement would target such a marketplace.

Bates provided enough technical help, though, to lay the foundation. With some extra assistance from the internet, Ross got the Silk Road marketplace up and running on his own. The site quietly went live in February of 2011. Ross’ dream had officially taken flight — and his fate was effectively sealed forever.

After that, things began to move very quickly. The site rapidly gained a life of its own and suddenly Ross found himself managing the largest illegal market in the world at that time and potentially in all of human history.

If you needed drugs or fake identification, the Silk Road was the place to go. Drugs were grouped under the subheadings: stimulants, psychedelics, prescription, precursors, other, opioids, ecstasy, dissociatives, and steroids/PEDs. You could also get fake drivers licenses from states/countries around the world. In fact, the only things that were prohibited by Silk Road’s terms of sale were items that could be used to “harm or defraud” others. Meaning that child porn, stolen credit cards, assassinations and weapons were all simply off the table.

Users could purchase their goods from verified, reviewed vendors so that quality, trustworthiness and anonymity were all ensured. And vendors could sell their goods anonymously to whoever wanted them, without Big Brother peeking in over their shoulder. It was a win-win situation for everyone involved.

Except, of course, for the government.

Because, since this was an underground black-marketplace, the goods being exchanged were not only illegal, but they weren’t being taxed either. No one was paying the piper; and when hundreds of millions of dollars are being exchanged and the government isn’t getting its cut, the Feds’ sticky fingers start to get itchy.

As Silk Road grew, Ross became increasingly stressed with the project and began to feel overwhelmed, says Lyn. Understandably. Here was a 26-year-old with little-to-no computer programming experience, no economic background and no criminal knowledge whatsoever running an international criminal bazaar — for Ross it was like trying to fly a fighter jet with no prior training or experience.

So, according to information on freeross.org, when an anonymous stranger (who had previously helped Ross close a gaping vulnerability in his Bitcoin wallet) reached out to him through Silk Road, offering to take the reins of the operation, Lyn alleges Ross did what any sane human might. He happily stepped away from the helm and let this stranger take over.

In a November 11th, 2011 message to his friend Bates, Ross told him about the transition of power. “Glad that’s not my problem anymore.” He wrote in a message.

On February 6th, 2012 the new owner and operator of Silk Road announced his fresh screen name: the Dread Pirate Roberts (DPR). Anyone familiar with the film (or book) The Princess Bride, knows that name. It’s the title of the dreaded pirate, who never truly dies, who only ever passes his identity on to a successor, a mythical, almost supernatural marauder. This person (or persons), whoever they were, would become the focus of the impending government investigation.

If Ross’ idea for a government-free marketplace has sparked a fire, when DPR hit the scene they threw gasoline on it. The site expanded rapidly, flourishing under its new leadership, optimized, like an engine fine-tuned by an expert mechanic. This was when the Silk Road started appearing in mainstream media news stories, started emerging from the shadows and when Chuck Schumer publicly declared his crusade against cryptocurrency exchanges and the Silk Road marketplace.

So who was this anonymous stranger? Who is this legendary Dread Pirate Roberts?

That’s the million-dollar question. That’s the question that will haunt Ross for the rest of his life, the question that investigators were about to bend over backwards trying to answer, and the question that is the subject of next week's installment.